A young psychiatric intern unearths secrets about the mental health facility in which he works.
The film opens with a flashback depicting a young boy attempting to escape from Cunningham Hall Mental Facility before getting hit by a car and presumed dead. In the present day, psychiatric intern Clark Stevens (Joshua Leonard) come to Cunningham Hall to train before he can graduate to medical school. Inside, he meets some of the patients and is welcomed by Nurse Betty, who gives him keys to and a walkie-talkie before taking him to the director of the facility, Dr. Albert Franks (Lance Henriksen). On the way, however, they are interrupted by a patient named Carl, who claims that he "shouldn't be here," and patients aren't allowed to go home when they're mentally stable. Betty shrugs the accusations off and pushes Carl away.
In Dr. Franks' empty office, Clark finds a book titled Psychology and the Paranormal, which implies connections between mental stability and the paranormal. Franks arrives and converses with Clark about the facility and its patients, with Clark suggesting some improvements for the building, but Franks replies sternly and bluntly before introducing him to Dr. Morton and Dr. Douglas. Clark now meets Nurse Sara (Jordan Ladd), who takes Clark on a tour around the facility. As they leave, mental patient Alice (Natasha Lyonne) sits watching a window, where she sees flashes of a demonic-looking boy. Sara talks privately with head nurse Annabelle Hendricks before finishing the tour with the basement cells, where the most dangerous patients are kept - a place nicknamed "Madhouse." One of the patients attacks Clark with a shard of glass but is beaten down by Drake, a gruff security guard.
Later at night, Clark witnesses a young boy running around before going to help with a "situation in the rec room," where he watches Hendricks repeatedly shock Alice with a stun gun over medication until she is saved by Carl. Clark sees the boy again and pursues him to the Madhouse but only finds Dr. Morton, who recalls a patient from Cell #44, who escaped but apparently died; however, Morton believes him to still be alive and back in the facility. Before he can continue, Hendricks arrives and gives Clark the task of cleaning up a mess in the rec room.
Sometime later, Clark retells the Cell #44 story to Franks, who curtly dismisses him. When Clark leaves the office, he overhears Franks arguing with Hendricks about how "she knows." Soon after, Sara is requested at the nurses' station for night duty. In the nurses' station, Sara and Hendricks hear a mysterious sound. Hendricks, equipped with her stun-gun, investigates the source and is attacked by a cloaked figure who electrocutes her to death with a defibrillator.
The next day, Hendrick's body is taken away, and Franks assigns staff to interview patients about the murder, with Clark being assigned to the Madhouse. Clark goes to Cell #44, where the patient - who identifies himself as Ben London - tells Clark that if he's looking for the murderer, "the top of the food chain is a good place to start," which Clark infers to be Franks. Sometime later, Clark asks Grace (the nurse in charge of medicine) what Ben's prescription is and what it's for. Grace replies that everyone in the Madhouse are on the same drugs, and Clark takes a bottle for examination. Sometime later, Clark attempts to confront Sara with some questions about the facility but is unable due to a nurse discovering Carl has hung himself.
In a meeting led by Clark and Sara, Alice talks about seeing the young boy, saying he makes sure that she "never forgets what madness feels like." Afterwards, Clark witnesses Drake having sex with a patient in an open room. Waking up the next morning, Clark gets a phone call from Sara that Drake is the murderer and has been arrested by the police. Later, Clark and Sara are trying to solve what is happening in the Madhouse but put the mystery on hold as they spend an intimate night with each other.
Taking Ben's advice, Clark does some research on Franks and the medication. It is revealed that Franks has been using placebos on the patients and embezzling all the funding for himself. Meanwhile, the same apparition that killed Hendricks kills Dr. Morton with an axe. The next night, Clark confronts Ben again and is only told "The truth is right in front of you." Clark goes to Sara with what he knows, and she gives him some coffee filled with sleeping pills. While dreaming, Clark is haunted by Ben's voice of the cryptic inmate and visions of the little boy before realizing that Sara is the killer.
Clark wakes up and fights the effects of the drugs long enough to get back to the Madhouse to talk to Ben, who reveals himself as the little boy, who quickly grows up into Clark. Apparently, Clark was Ben who ran away as a little boy and was presumed dead when Franks ran him over. The real Clark died, and Ben took his identity to get back into the Madhouse. Ben begins to remember killing Dr. Douglas and Nurse Polly. Ben confronts Franks in his office, attempting to flee and destroy all evidence of his embezzlement, and tells Franks who he really is right before killing him with the axe. Sara sees this and runs to the Madhouse. Ben tells her that he returned to the facility to make it better, and to get rid of everyone who didn't try to help him. Sara tries to convince Ben that he shouldn't kill her because he loves her, but he soon overpowers her before bringing the axe down on her, the screen going black before it makes contact. In the final scene, Ben is shown entering another mental health facility, dressed as "Clark" was in the beginning.
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